Updated from Feb. 5

Bristol-Myers Squibb ( BMY)delivered an ultimatum to its embattled partner ImClone Systems ( IMCL) Tuesday, demanding greater control over the experimental cancer drug Erbitux and asking ImClone's top executives, CEO Sam Waksal and COO Harlan Waksal, to step down temporarily.

The drugmaker's demands are being presented to ImClone as a take-it-or-leave-it set of proposals, according to a report in The Wall Street Journal. If ImClone refuses, Bristol-Myers is prepared to walk away from its $2 billion partnership with the biotech firm.

Seeking to "fundamentally restructure" its partnership, Bristol-Myers now wants complete control over the Food and Drug Administration approval process for Erbitux. Under terms of the original agreement signed in September, ImClone was in charge of getting the drug approved by the FDA. But that plan went awry on Dec. 28, when the regulatory agency refused to accept the Erbitux application.

Responding to Bristol-Myers' demands, Imclone issued a statement Tuesday night, stating, "We have received the proposal from Bristol-Myers Squibb outlining the terms of a proposed restructuring of their relationship with ImClone Systems. We will review their proposal and respond appropriately in due course.''

Furthermore, Bristol-Myers said Tuesday it is proposing that "certain economic, financial and other terms of the agreement be restructured," including "changes in ImClone senior management effective until FDA approval of Erbitux."

Bristol-Myers CEO Peter Dolan, under fire himself for his role in the ImClone debacle, is reportedly asking ImClone CEO Sam Waksal and his brother and COO Harlan Waksal to step down from their posts until Erbitux is approved by the FDA.

Robert Goldhammer, ImClone's current chairman and a partner in the money management firm Concord International, is reportedly being asked to step in as the company's temporary CEO, the Journal reports.

ImClone is currently the target of investigations by Congress, the Justice Department and the Securities and Exchange Commission over whether it misled investors about the FDA's concerns with Erbitux. The Waksal brothers are at the center of these investigations because they sold more than $150 million in ImClone stock before the bad news from the FDA was disclosed. ImClone's share price has dropped 70% since Dec. 28.

ImClone executives could not be reached for comment.

Bristol-Myers is positioning the restructuring of the partnership as a series of proposals that require ImClone's consent, but the biotech company appears to have little choice but to accept. Without help from Bristol-Myers, ImClone's chance of getting Erbitux approved takes on even greater risk -- something the troubled company can ill-afford these days.

"We are taking this action because we believe Erbitux has great potential to treat cancer patients, and we want to move the process forward as quickly as possible," says Dolan, in a statement.

The rather harsh demands being made by Bristol-Myers also suggests that the drug giant feels as if it was also misled by ImClone executives. One of the few unanswered questions in this whole saga has been how much information ImClone shared with its partner about FDA concerns regarding the testing of Erbitux.

The FDA's refuse-to-file letter makes it clear that as far back as August 2000, ImClone was aware that the agency had problems with the way Erbitux was being tested.

Under terms of the original partnership, Bristol-Myers paid about $1 billion for a 20% stake in ImClone, and agreed to pay another $1 billion in milestone payments tied to Erbitux's development. Only $200 million of that money has been paid so far. In exchange, Bristol-Myers receives 40% of Erbitux profits.

Shares of ImClone were up 48 cents to $16.98 in Tuesday trading. The stock rose another 8% after hours, when the news was announced.

Shares of Bristol-Myers were up 21 cents to $43.70 after the regular trading session, and were unchanged after hours.